The Bancorp, Inc. (TBBK) 26 Apr 242024 Q1 Earnings call transcript

Good day, and welcome to The Bancorp Inc. Q1 2024 Earnings Conference Call. [Operator Instructions] Please note today's call will be recorded. [Operator Instructions]

It is now my pleasure to turn the conference over to Andres Viroslav. ahead. go Please

Good today operator. Results thank for you Call. Thank The morning, Bancorp's us for Financial First joining you, and Quarter Conference XXXX

On Kozlowski, are Paul me our the Officer; Frenkiel, Officer. Executive and Damian Financial Chief call with Chief today

webcast being today. the There approximately of our website available XX:XX beginning at via webcast p.m. is will call at a Time be morning's on This website Eastern replay call www.thebancorp.com. on our

BANCORP. with dial-in for is replay confirmation The of X (XXX) a code XXX-XXXX the

to I risks uncertainties, over cause the when like in words or to Before call results, such identify to within remind similar could Private achievements this and performance Litigation actual of by the forward-looking would materially the Damian, or of I suggested Securities anticipated to subject the and turn to from call, XXXX. statements. are expects everyone used those differ believes, Act intended statements which expressions that meaning are anticipates, conference Reform Such statements

For these risks please the filings uncertainties, further discussion Bancorp's SEC. of see with The and

to the may Listeners after of place of events the no on which to statements, the obligation events. forward-looking or Bancorp of reflect undue publicly circumstances hereof. only to occurrence be unanticipated as to made release are to these speak the revisions undertakes which reliance any date cautioned forward-looking or not statements, The results reflect date hereof

Chief Executive Kozlowski. Now I Damian Bancorp's would like call Officer, The to turn to the Damian? over

was was X.XX% And to the quarter in improved efficiency a quarter-over-quarter, Fed the with while 'XX. were X.XX% first mostly XX% expenses Thank an from 'XX. quarter to than due XX% you, funds everyone. sold, X%, XX%, in of of X.XX% Andres. increase revenue X% and year-over-year. growth earned NIM morning, Bancorp ROE share compared Good The in lower XX% $X.X of first ratio to

the After relationships from to adjustment processing progress. fintech activities and Solutions show total X%. fees due GDV increased realization Fintech was 'XX client to and of quarter termination all growth year-over-year year-over-year. fee XX% expand revenue and of Group the XX% a continued first for in fee continue a The increased delay, 'XX

We expand with and partners capabilities add continue our partners. existing to new product

growth payments. neobank our Some fintech areas are and corporate highest portfolio the of

are card Block partner The of growth current Solutions relationship item. addition as We should announce increases organic to our continued and as portfolio pleased fees processing Fintech new this as to meaningful line other a the result of ACH the ecosystem. to in well new the

where significant to and regulatory requirements a sets robustness have be continues In environment to approach scrutiny, to of our with the innovate improving under many a helping our of our while regulatory our focus partners meeting product come competitors rigorous maintaining ecosystem. the

we side, growth had X% lending the across portfolio On of quarter-over-quarter. the

was and by institutional categories, are in year, less past more decrease rate book growth the mostly our than decreased of was the While other offset higher-yielding which fixed. by X.X%, quarter-over-quarter than in

share buyback our share growth Lastly, continued buybacks with impact $X.XX million. of second of in per million without our across our strong of $XX reaffirming the of and Solutions guidance group additional portfolio, growth lending we and $XX a quarter 'XX the Fintech quarter are in

now the on to color for the over quarter. Frenkiel I turn Paul first more call

Damian. you, Thank

benefit approximately In April of and $XXX increases. the Bancorp rate rate U.S. of result government income impact reduce on securities, Reserve purchases to performance cumulative purchased rate current to have At securities lives. future while yield, variable modest a to protection rate fixed estimated exposure As million weighted significantly is reflected decreases. average prepayment estimated its impact Reserve of loans continues the significant Federal X.XX% average in agency an X-year such XXXX, Federal from bank

modest Additionally, further continue reduce rate to exposure its changes levels. to to loans to fixed-rate continues the bank to emphasize

rate increases, higher-yielding Reserve In with the addition categories. by lending to in in benefited offset and the the from significantly increases loan decreases other IBLOC growth, company Federal SBLOC of impact

loans decreased total billion. by amounted the months, at SBLOC in XX, growth and which Accordingly, $XXX past March while $X.X million loans had IBLOC XXXX, to offset approximately date, XX other those reductions loan

impact of increases QX compared loan securities, aforementioned rate The income net rate reflected and higher-yielding the increases on Federal deposit categories variable XX% increase in rates in was XXXX. QX to growth interest Reserve XXXX and loans lesser a in in in

X.X% only the XXXX, or cost of result, X.X% increase XXXX, the of in assets an in in X.X%. in to factors increased yield Those X.X%. from QX deposits NIM to those periods on X.XX% reflected increased a As interest-earning XXXX. by in had X.X% The QX respective QX

XX, credit for for million XXXX provision XXXX. $X.X QX primarily for in The credit in losses QX compared provision reflected QX $XXX,XXX leasing $X.X local in activities which XXXX. impact million the XXXX at of in of related million March was losses and approximately The exposure trucking $XX charge-offs, was and long-haul to total

and Nonperformers as-is as-is million but mostly $XX.X value collateral as potential at of million leasing million, additional and an for LTV, by of building a to with appraisal an $X are result 'XX re-leased rental SBL increased September a quarter or independent the for compares stabilized apartment rehabilitation $XX.X during rates. loan progresses units as which XX%

weighted may date the based as-stabilized lending average origination apartment whole, on the billion $X.X date of as appraisals XX%. based was value estimated the third-party the as-stabilized-LTV bridge even appraisals. date the weighted portfolio That apartments Further, protection. measures LTV for portfolio after on the as-is LTV, origination origination XX% the rehabilitation average which For is provide greater a the third-party is complete,

other loans upon loan-to-value third-party of LTV of as-is an and higher as-stabilized potential appraisals as average and XX% classified ratio based with XX%. bank's appraisals significant Accordingly, even interest stresses, loss. protection rate reflect environment the provide For loans of those continue recent believe LTVs to against rebel weighted a we substandard, third-party

in offset which estate-owned by other related lower than than for a decrease more decreases increase expense categories, $XX.X other and QX million, was real benefits a XXXX XXXX. X% X% charges. in including Noninterest was QX was $X.X million salaries in A

share retained Book quarter increased value year the compared $XX.XX end to XX% a to $XX.XX earnings. at impact earlier, reflecting per of

by sheet have and bank's a to during risk nature has underwriting. balance supporting levels the the In collateral experienced the loan increased periods of contributed in which related have economic various profile markets earnings enhanced niches summary, Those even niches loan its special stresses.

loss Real requirements appraisals. estate LTV rental underwriting to lending states. workforce supported housing, which ratios significant We more working-class in at believe based protection bridge be is upon affordable comprised selected by we of apartments that consider against third-party as provide rates

SBLOC the X(a) loans (sic) or of while LTVs. are at SBA made come life significant and respectively value insurance, and government-related that loans guarantees XX% XXX by securities XXX marketable ] with IBLOC either cash SBA [ SBA loans are XX% loans collateralized that to are

funding included risk opportunities present XXXX, for still related risk the the tables sources inherent are opportunities while million. levels. planned the include as press enhances recently profile. prudently portfolios, in repurchases earnings Additional from profile shareholder capital and share of details increased levels our earnings regarding $XX further original may are in contributions in quarter of second company's Such the our increase The release million maintaining up to further value $XXX which loan our the our payments payments portfolios loan businesses,

now turn the to I'll Damian. call back

for open the could please line you, Thank Paul. questions. you Operator,

first David Our James. come will Instructions] question from Raymond Feaster with [Operator

OREO and What this today? like about room on credit? decision that be elephant Maybe the it specifics that you month you the Could need just just yourself. can of it rather you can than and from with line planning sold any this you at led losses? the maybe that touch when that looks that into and maybe stabilized took expenses come and let's time And credit. to you just no to to the talk do, It rehab just selling all think will this start with rebel the in finish are what

Okay.

case, when this, So in finish through Yes. they've more has additional a already sponsor, project, And raise to process. to Well, as additional situations inability put capital go like the and in. the an this we

process lease the months to it property. to over next needs the order fixed entire of be through a so And up to X whatever XX in goes

-- a and manager, finish with project property in the working plan as So it we're possible. we're we'll quickly as have place

we're not that looking monetize to for gain. process, a During entire it

we're property about project. completing would and the if people So the -- with discussions over somebody taking in

that's Paul? So ongoing.

Yes.

So going, get construction added and acted value -- really the to keep as actually as apartments we to add that's I preserve released the immediately want the quickly that important would because you possible.

to Construction as to and happen. There construction has already begun. is it quarters it's the but has will that rehabilitation already estimate, a begun. for rehabilitation least take several of The difficult part bit little of at involved

Just got Okay. you've capital And against any estimates that reserves it? of kind it. side might use curious you this have to that or that already that of you could on fund

there. the losses, on at value base the look LTV to continues you Well, if would you be which potential as-is

that's potentially increase ourselves we're as up actually the and the that to and going gets value why the stabilized. So property finish construction value preserve

Could borrowers? of confidence other gives are service Okay. the And remainder debt issues broadly? And just the touch and anticipating broadly Are more from this this on maybe maybe more maybe rebel what on Are pressures portfolio? like you you the hearing touch book in you how maybe you similar on book? one? LTVs

loans. 'XX First, vintage would from I originated as this today. And our wave the characterize -- in you that what the numbers see of bit there was 'XX was a a of mostly and

had We've performance. started in We couple been And shocks good shock, we So happened. We've that this We very this the had also shock. issued of business there then big since inflation happened and securities. XXXX. we what rate interest this. were a was even had

for generally, these doing to business pay they worked with for materials how Now in to apartments. the obviously, upgrade the deals to plans people in much go order that. inflation had changed shock, And the people of these

people off got people added plan, some capital. additional Some

rate you shock. had then this And interest

of it's So in you're take though there's a less even still it where a if where got sales GFC that to these have in, the rates where it's X%. refining you out maybe properties, came going wasn't -- once with was probably interest it takeout It of became to to rate more expensive project. money, trouble add finish higher project, raise or level, At it twice. more to you the because shock, the very inflation the you capital had into your did

in with their business be the refinanced. plans, So with working help can borrowers them to then and make our and where stabilized gets property that's order been sure we've

of There come kind some through. wave So more. might has be that

second a experienced haven't wave. We

So there taking some is Paul? stabilization place.

would still current equity if which show add XX% as an stresses of LTVs, an and that I better some other substandard, and and through, loans the you after given the all as-stabilized. have even slightly means extra more and kind issue, of went that they appraisals the as-is original updated look the classified the substandard, just LTV at Yes, Damian

So loss. again, we have significant protection against

the also hear just towards more partners That's just regulatory the to all. the of on to And switch and how core let's of? partners what touch contributing challenges curious the to you're touch bit your you -- little maybe When extremely trending? suspect That's you Could position, seeing maybe if Great case partnership a growth? pipeline the helpful. expect with pipeline on Just And I consists space in maybe the maybe given new Block. gears new to is it how that's shaping that's relationship and I'm the business. and elaborate start that look you huge. up.

funds So is. That's with that's relationship Block our ecosystem. rapid where

we that haven't fraction into quarter, of the a come small first XX%. less that, than we've So had -- volume

the that couple out see next over roll you'll of So quarters.

And going things announcing like is we'll pipeline exciting when The very on we've appropriate. portfolio. said things past, across be in strong, these our the extremely

significant have very Just with as it's continue we it these large providers But announce to partnerships only have announced volumes. appropriate. we'll that strong. very as today Block, It's becomes

X, partners accretive. partners when So the add a a economics lot X they year, and X table, up they're do a of we to bring to year, very

been on So that major like their looking visibility us few the industry allows programs obviously provider. scrutiny on hasn't changed. The that it it's to almost all are years, to that get last change this, maybe

to prospects strong. be be continue So the very -- it the of business to continues

next will question with Tim from come KBW. Switzer Our

have performance some the about looks credit us follow-up $X that increase a -- had color it of There $XX drove then, nonaccrual other there loan. credit also in million into nonperforming you shown or yet, rental above in paying that? kind on the please? the increase provide up in stopped that NPAs. loans is another other beyond the not what moved but seen. we've There's on that some color is million And could provide metrics yet any Could portfolio, notable if I there, you

have business long-haul a So had the that charge-offs We -- and is transportation. is $X a issue various of the we've is small primarily do terms of leasing industries. referencing in trucking comprised and lot primarily of million loan, The you're of just variety diversification.

the those, to hit nonperformers, will we to we hit have they but obviously several the think of them and We're and expecting of are that carefully, increase tables not detail should SBL leasing in just -- very or systemic like this we I XX-Q happened happened just -- in scrutinize the anything the provide portfolio really the that more quarter. knowledge don't required.

do deposit the you still as anywhere $X asset you're that Great. color said do between Okay. good target? to gap to purchase starting $XXX Appreciate quarter, that beta April. think in what's the I XX% Is you sensitivity kind trying How it's the billion. last guys close of more? have? And the guys see plan there. securities, And much to you to new $X.X you your million billion to to

Okay.

Okay.

balance increases on happened, broad and things way different asset to down remember, run about a sensitivity that, we XX% it the So get had having our environments. remember, think effect bond -- opened terms, But what rate it's these sheet, you very bought to then and And very obviously, we models are all broad we if hadn't is when said to a got interest we -- And strokes. the fixed. the in dramatic our profitability. in our

originally, deposit right? rate putting bond were Now, to $XXX XX% gap XX%. with XX% that our the -- the because of since and get was So rate on in we've substantially. we trying last beta fixed And then we were beginning about year, closed to fixed fixed, purchases, million assets,

asset would So sensitivity. our offset totally it

So that. we've made doing great progress in

about exposed, magnitude or asset lowered the for net X% our or to lowered sensitivity. income if it, that were So That's again, we've X% you once down about and broad move we think interest X% XXX basis very for strokes, X%. that we've points

print, set a they print looking we very And been and to at Now because time we a us. we obviously of waited CPI there that and the into very to thought the overreaction be little of and forecast, in But buy an went insurance. that CPI just buying recently higher We obviously, for was. kind might broad long actually would be had was market, these due purchases. indicators a housing started than which there mostly green

the that and indicators, is day. the the in definitely when look you broad So at economy slowing, you saw print GDP other

did interest think sensitive. the in close They treasury highest. gap securities like its have almost of additional treasury go into why kind million in could rates more and the buy their we we that's of that still gone your X% higher, and So we're probably asset go And entirety. would would if range, XX-year $XXX they

without building new close purchase have, securities. the over do in the we're -- products next X meaningfully that with originating balance and on our loan the additional gap or If going that months we of that our some the we to the that you're sponsorship don't sheet, products credit of

make we're most trying think be to the the asset we not was weren't it greedy. million and We're again, we to of $XXX time We sensitivity money. majority the the we -- did the what table, trying the that's once right thought purchases. off in take with to So

Our next from come Schiraldi Piper will Sandler. with question Frank

year-over-year. growth going the Just income noise wondering the the if can fee back growth, GDV of some year-over-year -- and to you

that up more in in gross Given Or areas, are of at the point? pipelines, you're coming be going GDV framework dollar range? outside partnerships you in these given generally, this is other XX%-plus to that still comfortable growth growth some putting volume

any X GDV is predict very quarter. hard to

that do XX%. be it'll still above we think trend, above So the we -- think

your very XX%, growth is exactly if that's high fee growth GDP in said. rapid the XX% is you what and like the was businesses It's ancillary funds Now -- environment.

So we're ancillary of those seeing revenues. more

we inverse, fee So for growth. growth -- obviously, XX% predicting growth, We the and I way fee I would better got obviously would GDV around, but other profitability. more XX% the have rather is GDV XX% than which were XX%

still growth will of GDV. that's see areas fee Block, enhanced of we set product the it going like the me especially -- GDV, growth of but on rapid you're trend see realization funds. in especially new it and -- think and it's with above surprised actually the And like upwards, partnerships to to but So addition we'll because

running sorry, the the to funds partnerships announcement. on partnership, a and a get curious if up just timing provide then it And rapid know Block on just takes on I what you and while can is these more color the after little usually?

So of is growth, XXXX revenue this partnership? more Block maybe the incremental a to boost

been the less quarter, XX% this of it's ramping transactional in the first volume or up. now. No, and is was

this So large and remember, -- adaption This ecosystem throughout you'll the continued But them quarter, large Block a is will is in see then year. is growth. build this this impact -- with significant the is already into -- leading and not volume. it obviously, an fintech their a of our

Got you.

you quarter revenue Or And said of the now? saying quarter? are Okay. in was first first you actually the in some that

The yes. first a there of that was quarter, revenue, amount small

Okay. faster. And open move was if I some over you now to it bringing you're and you're just obviously, into then rebel know, about just -- as curious faster, be bid, nonperformers book, expected that you can guess and why. on it loan Obviously, to in you time. you the move stabilizing it talked OREO

sell curious, before LTV you it -- you like completing it likely as-is the term given in Just more sound the the that's to an improvements. the basis, doesn't on believe near think why don't scenario

kind a just bit? of that could you If through little talk us

paths. all down go We

the at XXXX higher shocks And obviously 'XX. like happened So markets rates. We've issues that done this. similar are were no were virtually the loans of we've that since and things in XXXX. experienced had this, because obviously, This to

as down go as we the they out past. in definitely, there might But all the So not were buyers tracks. numerous be

So we assets have. in there we is And sale, can if for wait that. a will. reasonable But interest that we the can't we effect

predict value quickly to to it of as -- want monetize the We the we have as possible. property and

to And -- far It's get that this preserve in there occur, get trouble, our be situation to monetize the the to refinancing to we to through so either through some borrowers needs we and we -- it's unfortunate want to in quickly immediately property complete never sale bank project, complete do sponsors a along. when our and be the go but obviously, a a with a so able need in and There's a or If GSEs, -- or got fairly It's that. it. to in a these do step you sale, it that's the earlier the in. have completed. X/X you very situations the the need we it to project into project. be is property, finish last of Remember, been can happy and do monetize little want to they and work. We through work we'd

And the Okay. the those cost is improvement, the -- improvements, could for How stabilize, How accounted any are look the is lines construction the those like? that of as carrying And that how for -- the you finish you sort what does expense there? expectations that building? for? as actually how along costs of of numbers

Paul? Okay.

Yes.

budget, detailed we have budget. So a a

loan-to-value be after estimated preserved. those fact, So cost. And we have even the will the expenditures, in XX%

rehabilitation still dramatically as we're the be And dollar. as prospective released, property. of that's are will progresses, units they LTV how the are I dollar to value the capitalized. the said, as So so some as get be maintained. increases construction, costs, But planning as available, for Damian dispose it and reserves buyers to There said, won't

Okay.

to capital plan, the are that still carrying that of up shouldn't see terms given budget, anywhere really saying in the So that are else we a cost? tick in expenditures reserves there you expect just

disproportionately on to There'll be be amount will under the those the books but not be XX%. have get some to it large. don't will will at because expenses be increase have capitalized it's most we It reserves, to we -- the extent going

you lease LTV you the offset each of obviously, up, as kind remember, you release And because expand, down and actually Yes. goes they other. units as

Right.

Okay.

of have so up project with day it's the good done, going by -- actually the loans They're these is because they So than first -- end you're issue get time why of issue. project. these you the when do at the to end this portfolios the that an beginning like not the have are an

put actually work So after years, obviously, position been probably already might been couple in have lot a the capital. But get some a in, completed, additional now of and raising step problem, if problems. a then right? capital probably additional there's we to a that's has also of There have sponsor's

want This economy. units stepping do borrowers we're and are when that. hard We sponsors units. housing. -- These to in, not replace usually, these important -- we necessarily it's renovate. they're workforce to want These don't are the our So very to very to is

it's rehabilitation is government essential the one of occur, this agencies. third-party So process or government the us through to through or whether

be so think sponsors So involved other on want successful a as and to be it's to in. And we important buildings. be we an part for and us they our can bank to rehab go

to step the take -- have scrutinize but we to We losses there -- unfortunate don't we're we portfolio. look do the we are in think not think going portfolio. we It's in,

that can of that is around terms give will in any us out. more up criticized, And us But seeing front, terms in of you classified ways in specifics additional the can rebel the on in book Q, pop of then, quarter-over-quarter? book in any just any which Q? you on or other a detail obviously, you're guide we'll little in information get lastly And the that any give balances numbers delinquencies got sort

shocks I the let too, right? is because are where were more takeout I X/X taking like last to to -- It originating -- of these especially that the a interest is But Paul from in when this loans about. GSEs and I'll shock shock. before, isn't So talked And was projects additional but still the you've these speak it a that problem environment, it, capital like problem the out saying bit we the towards not had was And raising the the takeout wave, -- and people money in range, already so X% inflation for higher financing now. raised interest problem. inflation the rate that for make the a up was above little

that has So substantially. wave subsided

should should as may a of it complete course, but So projects down wave, have monetize -- credit calm we these second migration, assets. while we be might more these there some and it

Paul, would you like to add anything?

Yes.

Frank, are the ones concern forth. They loans issue the and the have that So obviously -- are the so substandard. some

there get said what XX% And is do still so based the updated is, before, stabilized. an we an issue, on the if as we LTV updated appraisal. substandard as-is, I And loans, as our on XX% appraisal,

third-party again, So of against in at protection look others do -- arise economies, increases at you in just we and delinquencies. you And word don't if retain the these our But look issues still it, their have some significant loans, stressed see loss. difficult take They value. the difficult you the have do increases portfolios, and and in experience do where see times the classified you in our appraisals. statistics, have for you to losses, experience

what this it's certainly if even category we against about that think be the be rents office -- to going to these But you if protection purposefully of commercial and this that one you to fact chose not -- this, losses so going real the stressed, to is but at shortages, is like come housing the losses and provide is that well, that the it's buildings in obviously think And estate look these portfolio rents, to just is still out forth. very reasonable higher-end resist compared believe we housing, are be times. in this workforce

always disclosing been that, our We've at for portfolio We've it's years the even a LTV XX%. is substandard the whole. that the loans, with the with very And you a And sustained LTVs, for word take LTV. XX% it. on don't have open still to origination been stresses been at now as

that Damian don't see So we that's portfolio. why believe, we said, losses the in as

to. certainly something just attention NPA No, Yes. appreciate is people it. pay I obviously, migration I guess

what start balances to And NPA so like people wondering look are could quarter. going next

delinquencies into tomorrow. so could today And turn NPAs

-- there's sense. I'm had a obviously, makes trying So now and just get you which into it's sense this the -- if K, to delinquency, large large any NPAs, last

anything just potentially and curious status that's now if And there's could fall quarter? think into so to nonperforming/OREO call you book delinquent in next bulky out that

Well, the big $XX.X one. the million is

to indicated all Yes. So we've like discussing loss I that. that in And there have that been is -- ascertain that not property. the information, think, we and you have

Okay.

criticized So the we'll Q? numbers, we'll that the get classified, I guess get the delinquency with

course of Yes, Yes.

just Okay. just this doubled on Obviously, quarter. for And you buybacks. then lastly the authorization

wanted there repurchases. how me guess it curious color the $XX just quarters. forward? right of of But million I thoughts Any your seems -- about in buybacks there's around think and going kind color Just on sort the normalized is like to to you plan more see I return third to now if fourth to any around --

Yes.

to generate with been have obviously, enhanced robust capital moving ratios up -- have even and very our the ability we we buyback. So

us, as where a the a -- give daily became third we're know, party it basis -- very the on buy it systematic rigorous into to we kind approach don't you we had significant of we they think increase in doesn't -- enough So a distort ROE it very and aligns. shares to clear metrics, doesn't our market. had We've and capital. But became it that it the so

Our P/E ratios just ROA it and being profitability. XX%, under and reflect historically at our ratio X%, ratio our efficiency doesn't XX% ROE XX% this being at today at obviously, P/E

capital So it our of buyback and plenty enticing, shareholders room. had think, increase our for we became very to we

this with the balance healthy additional even -- growth in repurchase we have million capital even of capital the enough to $XXX buyback ratios. -- with our sheet, the and share and -- have So with we will

thing right we but for it quarter. seemed the was So it even do us it appropriate of to generally it became one-offs, very don't kind though obvious do this to do,

any to or for this like call At additional closing would the Kozlowski to I Damian remarks. time, turn back

for you, call. today. joining Thank disconnect the us everyone, operator. Operator, can Thank you you,

This does conclude Conference Call. The Bancorp QX 'XX Earnings

You may and have day. disconnect your line a at this wonderful time,